BY BABAJIDE KOMOLAFE & YINKA KOLAWOLE
The Federal Government yesterday through the Nigeria Deposit Insurance Corporation (NDIC) assumed ownership of Afribank, Bank PHB and Spring Bank via the “Bridge Bank” mechanism following the revocation of their licences by the Central Bank of Nigeria (CBN).
This means the three banks will still be open to customers and continue to operate normally under the control of three bridge banks created by the NDIC to assume their assets.
The Bridge Banks are Enterprise Bank Limited to assume assets of Spring Bank, Keystone Bank Limited to assume assets of Bank PHB, and MainStreet Bank Limited to assume assets of Afribank.
A bridge bank is a temporary bank organized by the regulators to administer the deposits and liabilities of a failed bank . Bridge banks must be chartered as national banks . To the extent possible, bridge banks are required to honour the commitments of the failed bank to its customers, and not to interrupt or terminate adequately secured loans . Bridge banks are authorized to seek to liquidate failed banks, either by finding buyers for the bank as a going concern, or by liquidating its portfolio of assets, within two years, which can be extended for cause by an additional year.
Managing Director/Chief Executive, Nigeria Deposit Insurance Corporation, Alhaji Umar Ibrahim, who disclosed this at a press briefing in Lagos yesterday, said the CBN has granted banking licences to the three bridge banks and have guaranteed their inter-bank obligations until December 31, 2011 to ensure continued operations and customer confidence. He said that each bank will now answer the names of their respective bridge bank while their management and staff are now contractually employees of the bridge banks. He said the law allows the Corporation to operate the bridge banks up to three years.
Afribank, Bank PHB and Spring Bank were among the 10 banks bailed out by the CBN in 2009 with injection of N620 billion tier two capital.
Ibrahim noted that while two of the banks namely Wema Bank and Unity Bank had successfully recapitalised, four banks namely Union Bank, Intercontinental Bank, Finbank and Oceanic Bank have signed legally binding Transaction Implementation Agreement (TIA), a significant step towards recapitalisation by the deadline of September 30th set up by the CBN. Equitorial Trust Bank Limited is currently in the final stage of negotiation with a prospective investor with strong likelihood that it will meet the recapitalisation deadline.
However, the remaining three banks (Afribank, Bank PHB and Spring Bank) have not shown necessary capacity and ability to recapitalise within the September 30th deadline.
“Accordingly, in the interest of depositors and to prevent liquidation which will have dire consequences for depositors and undermine public confidence in the banking system, pursuant to the provisions of the NDIC Act, the Corporation, after due consultation with the CBN and the Federal Ministry of Finance and with full support of the Federal Government, has resolved the problems of the three banks through the Bridge Bank mechanism.
To this effect, the assets and liabilities of the affected banks, whose licences have now being revoked by the CBN, have been duly transferred by the Corporation to newly incorporated Bridge Banks as follows: “Main Street Bank Limited has assumed the assets and liabilities of Afribank Nigeria PLC; Keystone Bank Limited has assumed the assets and liabilities of Bank PHB PLC; Enterprise Bank Limited has assumed the assest and liabilities of Spring Bank PLC.
“The Corporation is encouraged by the provision of the Bridge Bank option in our law, to resolve the problems in the banking sector. The Bridge Bank option is a veritable tool of enhancing depositor protection and promoting confidence by ensuring seamless continuity of banking operations.
“The NDIC will operate the Bridge Banks until such a time that we engage the Asset Management Company of Nigeria (AMCON) with a view to recapitalising the bridge banks. AMCON is expected to open up negotiations with investors who may be interested in capitalising the Bridge Banks”.
Meanwhile the CBN in a press statement issued yesterday affirmed its support for the adoption of the bridge bank mechanism for the resolution of the three rescued banks.
The statement said, “The Central Bank of Nigeria (CBN) is aware of, and supports the decision of the Nigeria Deposit Insurance Corporation (NDIC), to exercise its statutory powers under the Nigerian Insurance Deposit Corporation Act, to establish Enterprise Bank Limited, Keystone Bank Limited, and Mainstreet Bank Limited as Bridge Banks, and by Purchase and Assumption Agreements, cause all the deposit liabilities and certain other liabilities and the assets of Spring Bank Plc, Bank PHB Plc, and Afribank Nigeria, respectively to be assumed by the 3 Bridge Banks, effective 5thAugust 2011.
The NDIC, in its role as insurer of deposits and in pursuance of express statutory powers, acted to ensure that public confidence in the nation’s banking system is not eroded and that depositors’ funds are safe. The CBN, as the principal promoter of a sound financial system in Nigeria, and as required under the NDIC Act, has issued banking licenses to the Bridge Banks.
Accordingly, the CBN hereby makes the following assurances to the general public: That the depositors of the Bridge Banks are assured of the safety of all their deposits; The CBN assures seamless business continuity and ability of the Bridge Banks to meet obligations to depositors and lender-creditors as they arise, by granting all waivers, forbearances and exemptions necessary for their operations; That the CBN guarantees the inter-bank obligations of the Bridge Banks until December 31, 2011 to ensure continued operations and customer confidence.”
The CBN, as the principal promoter of a sound financial system in Nigeria, and as required under the NDIC Act, has issued banking licences to the Bridge Banks. Accordingly, the CBN hereby makes the following assurances to the general public: 1. That the depositors of the Bridge Banks are assured of the safety of all their deposits.
2. The CBN assures seamless business continuity and ability of the Bridge Banks to meet obligations to depositors and lender-creditors as they arise, by granting all waivers, forbearances and exemptions necessary for their operations. 3. That the CBN guarantees the inter-bank obligations of the Bridge Banks until December 31, 2011 to ensure continued operations and customer confidence.